- Nike Inc (NYSE: NKE) shares are up 19 percent year-to-date and are trading close to the higher end of their 52-week range of $79.27 - $117.72.
- Morgan Stanley’s Jay Sole maintained an Overweight rating on the company, while raising the price target to $130.
- Nike continues to be a growth story and its EPS is expected to continue to surpass market expectations, Sole said.
Analyst Jay Sole mentioned that Nike continues to be a growth story and its robust balance sheet is helping it create a “virtuous circle of outsized investment spending, operational excellence, brand strength, and ROIC gains.”
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The company delivered a strong 1Q performance and reported better-than-expected EPS growth of 23 percent y/y, driven by 740bps of international margin expansion. Nike brand’s EBIT margin outside North America increased from 22 percent last year to 29.4 percent, due to improved brand strength and solid execution.
The EPS estimates for FY16 and FY17 have been raised 4 percent and 17.8 percent, respectively, to reflect higher international margins and lower tax rates. The revised estimates also reflect a reversal of this year’s North American gross margin erosion due to West Coast port delays.
Sole expects the current momentum in Nike’s stock to continue through the October 14 analyst event and believes that it offers growth at a reasonable price.
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